Daily Price Outlook
The USD/JPY pair experienced strong downside pressure, falling to a nearly four-week low below the 146.00 mark during the early European session on Thursday.
However, the movement was driven by increased concerns about the global economic outlook, which led to a broader risk aversion in the markets.
As a result, investors sought safe-haven assets like the Japanese Yen (JPY), which strengthened, while the US Dollar (USD) weakened due to these heightened economic fears.
Global Risk Aversion and US Tariff Announcement Weigh on USD/JPY
However, the slump in the USD/JPY pair can largely be attributed to the heightened global risk aversion following US President Donald Trump’s announcement of sweeping reciprocal tariffs on imported goods.
These tariffs, which threaten to reshape the global trading system, sparked fears of a potential slowdown in global economic growth.
Therefore, the resulting negative market sentiment boosted demand for traditional safe-haven assets, with the Japanese Yen benefiting from this shift.
The JPY soared to a three-week high against the USD during the Asian session, as stock markets around the world plunged in reaction to the tariff news.
Monetary Policy Divergence Drives Demand for JPY Over USD
Another factor contributing to the USD/JPY decline is the growing gap between US and Japanese monetary policies. The Federal Reserve is expected to cut rates soon, fueled by concerns over the impact of tariffs on the US economy.
Meanwhile, the Bank of Japan (BoJ) is likely to continue raising rates due to persistent inflation, further narrowing the rate differential and boosting demand for the lower-yielding JPY.
US Dollar Weakens Amid Falling Treasury Yields and Growing Rate Cut Expectations
The broader market is shifting towards currencies that offer lower yields due to increased risk aversion. This has led to a sharp drop in US Treasury bond yields, with the yield on the 10-year US government bond falling to around 4.0%, its lowest point this year.
This change in the bond market has strengthened expectations that the Federal Reserve will start cutting interest rates again.
Investors are now betting on three 25-basis-point cuts by the end of the year. These expectations are mainly driven by concerns over a potential slowdown in the US economy, which has added more bearish pressure on the US dollar.
Therefore, the decline in US Treasury yields and rate cut expectations have weakened the USD, boosting demand for the JPY as a safe-haven asset, which has contributed to downward pressure on the USD/JPY pair.
Moving ahead, investors are now turning their attention to upcoming US economic data, including Weekly Initial Jobless Claims and the ISM Services PMI. While the latest US ADP report showed that private-sector employers added 155K jobs in March, the overall outlook remains cautious due to the tariff-related concerns.
USDJPY – Technical Analysis
The U.S. dollar is rebounding modestly against the Japanese yen after a sharp intraday sell-off that broke decisively below the rising channel structure.
The pair fell from above ¥149, slicing through key support at ¥148.095 and triggering a steep drop toward a local low near ¥146.80. The price now sits just above the buy-entry zone at ¥146.607, where dip buyers may attempt to regain short-term control.
Technical damage has been done with the break below the 50-period SMA at ¥149.457, shifting the short-term bias to bearish.
However, momentum indicators suggest the decline may be overextended. The RSI currently reads 30.60, indicating the pair has reached oversold territory. If ¥146.607 holds, a recovery toward ¥148.655 is possible, in line with the previously tested support-turned-resistance level.
Below ¥146.607, further downside could accelerate toward the stop loss zone at ¥145.654. A break of this level may expose deeper levels at ¥144.979 and ¥144.226.
Conversely, a bullish reversal above ¥148.095 would shift the tone, reopening the path toward the 50-SMA at ¥149.457. Entry above ¥146.607 favors a rebound toward ¥148.655. Stop loss placed at ¥145.654 to manage downside exposure.
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